AIRT Air T Inc

Item 1.01         Entry into a Material Definitive Agreement

 

On May 6, 2021, Air T, Inc. (the “Company”) announced the May 5, 2021 formation of a new aircraft asset management business called Contrail Asset Management, LLC (“CAM”), and a new aircraft capital joint venture called Contrail JV II LLC (“CJVII”). The new joint venture was formed as a scalable asset management platform to complement the Company’s existing operating businesses. The new venture will focus on acquiring commercial aircraft and jet engines for leasing, trading and disassembly. CJVII will target investments in current generation narrow-body aircraft and engines, building on the Company’s 79%-owned subsidiary Contrail Aviation Support, LLC (“Contrail”)’s origination and asset management expertise.

 

CJVII will initially be capitalized with up to $408,000,000 of equity from Air T and three institutional investor partners, consisting of $108,000,000 in initial commitments and $300,000,000 in upsize capacity, contingent on underwriting and transaction appeal. The three investor partners bring significant aviation experience to the joint venture.

 

The Company and Mill Road Capital (“MRC”) have agreed to became common members in CAM, the aircraft asset management business. CAM will serve two separate and distinct functions: 1) to direct the sourcing, acquisition and management of aircraft assets owned by CJVII (“Asset Management Function”), and 2) to directly invest into CJVII alongside other institutional investment partners (“Investment Function”). The Company and its affiliates will perform the services required for the Asset Management Function in exchange for 90% of the economic interest derived therefrom. For the Asset Management Function, CAM will receive origination fees, management fees, consignment fees (where applicable) and a promote.

 

For its Investment Function, CAM has an initial commitment to CJVII of approximately $53,000,000, which is comprised of an $8,000,000 initial commitment from the Company and an approximately $45,000,000 initial commitment from MRC. Any investment returns will be shared pro-rata between the Company and MRC.

 

The CAM LLC Agreement provides that the limited liability company and each series will continue for a period of seven (7) years from the closing date, provided that the term of the company and each series may be extended for two (2) consecutive one-year periods after the initial term.

 

The foregoing summary of the terms of the described transaction documents and the foregoing description of the Amended and Restated Limited Liability Company Agreement of Contrail Asset Management, LLC does not purport to be complete and is qualified in its entirety by reference to the Form of Amended and Restated Limited Liability Company Agreement, a copy of which is attached hereto as Exhibit 10.1, and incorporated by reference herein. Portions of the limited liability company agreement exhibit have been omitted for confidential treatment.

 

On May 6, 2021, the Company issued a press release discussing, among other things, formation of the aviation asset management vehicle (the “Press Release”). A copy of the Press Release is attached hereto as Exhibit 99.1 and incorporated herein by reference.